The typical medical bill in America is no longer paid by a patient; it is paid by a computer. And a new branch of medical science has developed: the science of reimbursement, or how to make the computers pay more.
Almost all large hospitals in the country now have reimbursement officers, medical cost accountants whose job is to maximize Medicare payments. They bear the same relationship to the Medicare cost-reimbursement rules that tax lawyers do to the Internal Revenue Code.
Doctors, too, have learned to talk to the computers. Consider the case of the California Relative Value Studies (CRVS), an intermittent publication of the California Medical Association.
Most Americans have never heard of it, but the CRVS provides the vocabulary for their doctor bills.
It is one of the countryhs most influential lists of medical procedures -- all the services doctors perform for patients.
Each of these thousands of procedures is catalogued, then given a code number and a relative value expressed in nonmonetary terms -- so many "units" for the simpleast office visit, so many for an appendectomy and so on.
These relative values can be -- and are -- readily converted into dollars. Doctors all across the country use the code numbers and to some extent the relative values in the CRVS and sister lists in billing patients. Insurance companies and government agencies -- or their computers -- use the code numbers in making payments.
In 1974 the California Medical Association revised the CRVS. In part the revision was simply an effort to catch up with changes in medical practice. But government and private health insurance officials quickly charged that the 1974 CRVS did something else as well:
It gave physicians new ways to fatten their fees.
The 1974 revision did not particularly raise the value of old procedures -- those that had been listed in the previous 1969 edition.
Instead, what it did, according to a draft report on CRVS by the staff of the Senate Permanent Subcommittee on Investigations, was to add hundreds of new procedures.
New levels of complexity were established.
A special new category of hospital visit was created, for example -- a visit on the day a patient is discharged. It was given a higher relative value than a routine hospital visit, for which the value was not changed much.
Several new categories of office visit were also created and given high values. One was any visit involving "comprehensive reexamiination" of a patient whose case was "complicated by chronically disabling conditions." Congress two years before had for the first time made disabled persons -- and their doctors -- eligible for reimbursement from Medicare.
Another example had to do with cataract operations which, because of the number done each year as well as the cost, are one of the most expensive types of surgery that Medicare finances.
In 1969 three kinds of cataract operation had been listed. In 1974 two more were added. Each of these new kinds involves sudisputed special difficulties; each was therefore assigned a higher relative value than the basic cataract operation. But in 1969 they had been included within that basic category. The special difficulties had been dealt with as standard problems, at no extra cost.
Doctors say they are justified in charging higher fees for harder tasks. Critics say the doctors are moving toward "a la carte medicine." In any case, federal officials and staff analysts in California's Blue Cross and Blue Shield programs protested to the California Medical Association in 1974 that the new CRVS was inflationary.
In all, there were 1,860 more procedures in the 1974 edition than in the 1969 one, about a 50 percent increase.
Blue Cross of Southern in an internal analysis obtained by the Senate subcommittee staff and quoted in its report that many of the new procedures were justified by changes that had occurred in medical practice from 1969 to 1974.
"However," the Blue Cross analysis continued, "it does appear that the basic reasoning for increasing so drastically the number of items included in the RVS is to provide the physician with a means of charging more for the services that he is providing the patient...."
A Blue Shield analysis also obtained and quoted by the Senate subcommittee staff was sharper in tone. "The concept of office visits being related in value to a combination of time and skill appears to have been abandoned," it said. Noting that a special new category had been created for office visits involving a "diagnostic problem or challenge," it said: "This... defies evaluation. Take only the first new category: how can any physician visit not deal with a diagnostic problem? Who defines a 'special challenge' or a difficult diagnosis?"
It went on to complain that "the underlying principle of the 'average case 'being the basis for surgical fees seems to have been discarded," and concluded:
"Rather than reflecting medical economics as practiced, it is our opinion that the document reflects medical economics as the [drafting] committee would like it to be practiced...."
The Department of Health, Education and Welfare joined the chorus. It's West Coast Medicare office observed in a letter to the medical association that "there is a strong inducement in the new terminology to charge above-usual fees" for a number of services, and said the government feared "considerable fee escalation resulting from the use of the 1974 revision."
HEW has refused to recognize the 1974 revisions in reimbursing doctors under Medicare. It has also refused to grant nationwide recognition to many changes proposed in the 1969 revision of the CRVS; that, too, involved the listing of hundreds of new procedures.
A minor test of wills resulted. Doctors in California and assorted other states are busily submitting bills in the 1974 lexicon. The government is determinedly translating them back into earlier, less costly terms before making payment.
Payments to doctors still have risen. Other aspects of the fee-setting process more important than the CRVS allow them to do so. But HEW says they have not risen as much as they otherwise would have.
Out of public view and outside the normal political process -- computer codes, after all, are not a very zippy subject -- the national government and the nation's doctor's have been in a fairly fundamental dispute over fees.
There also have been disputes with the hospitals.
To some extent, hospitals bills in the United States have always been works of fiction. Hospitals have charged more than their true costs for some services, particularly the so-called ancillary services -- lab tests, X-rays and drugs, for example. They have used the surpluses generated in these dpartments to subsidize other areas of operation -- the maternity ward is an example in most hospitals -- or to keep the daily room rate lower than it might otherwise be, or help finance expansion, or cover bad debts.
Medicare, however, will not pay a hospital's chares. Partly for obvious protective purposes, partly to keep a trust fund for the elderly from subsidizing other sectors of the population, Congress decreed that Medicare should pay only a hospital's actual costs and only that share of those costs attributable to Medicare patients.
A whole industry has now grown up, devoted to determining just what those costs are.
The main thing at issue is a hospital's overhead -- the administrator's salary, the cost of the admitting and billing departments, the utility bills and various housekeeping cost. The art is to allocate as much of this as possible to those departments heavily used by Medicar patients; then Medicare will end up paying a higher percentage of these costs.
This allocation process leads to enormously complex disputes. As with that over CRVS, millions of dollars are at stake. Also, as in the CRVS case, they tend to take place inside the bureaucrac and outside the formal political process and public view.
An example: two years ago HEW proposed new allocation rules, under which a hospital could allocate the costs on running it sadmitting department.
The hospitals proposed instead the these costs be allocated according to the number of patients admitted in each department.
What was the difference? The hospital plan would have kept admitting costs from being allocated to ancillary departments, which Medicare patients tend to use less than other patients. Instead, under the hospital plan, all costs would have been allocated to the basic medical, surgical and other wards more heavily used by the Medicare recipients. And so Medicare would have ended up paying a greater share of hospital overhead. The hospital plan was finally rejected, the HEW plan adopted.
Another example of how the system works: a hospital here is planning a new intensive care unit, and was trying to decide whether to make it 6,000 or 9,000 square feet.
Under the Medicare rules, some overhead costs are allocated among hospital department by square footage. The larger the new intensive care unit, the smaller the share of other departments would be in the hospital's total square footage, an dthe weaker their claims on the Medicare dollar would become.
The hospital is doing a separate computer run to find out how the larger unit would affect its reimbursement rate. That will not be the only factor in deciding which size unit to build. But to some extent, the hospital administrator acknowledges, in this case as in other cases, a medical decision has also become a reimbursement decision.
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